Global Warming Is Real – Still, Do Not Force The Adoption Of Imperfect Renewable Energy, Put More Money into R&D

WASHINGTON – If we knew for sure that man-made global warming were accelerating at a dramatic pace, threatening an imminent global catastrophe and the very survival of the world, then the most desperate counter measures would be appropriate. But we are not there. We have a major problem that is progressively getting worse; but not a catastrophe. The environmentalists of course believe the opposite, and therefore believe that in order to save the earth it is appropriate to impose punitive taxes against carbon based energy, while at the same time forcing the immediate adoption of still imperfect renewable energy technologies.

Green tech not quite mature

The fact is, as Biorn Lomborg, Director of the Copenhagen Consensus Center, argues in a compelling FT piece (Only cheaper “green” fuels will force changes in energy use, July 30, 2013), that: A) while global warming is real and is a serious problem, we do not have an impending catastrophe; B) the early adoption of green technologies as they exist today would not do much to reverse global warming; C) this “solution” amounts to imposing an enormous cost on consumers forced to use electricity that is much more expensive, because it is produced by as yet immature renewable energy technologies.

To be clear, Lomborg does not dismiss global warming as a fantasy, nor does he believe that the pursuit of renewable energy is wasteful.  He has no “pro-carbon” bias. His argument is against the early adoption of green technologies that, while promising, are still not cost-effective. His simple point is that when wind, solar or whatever else will be really cost competitive, they will replace carbon based energy sources, as a matter of course, without any subsidies, special taxes or other ad hoc policy mandates.

Better technologies always displace older ones

As he points out, we did not get the world to adopt personal computers by subsidizing rudimentary electronics and by taxing typewriters, so that people would be forced to buy ineffective, primitive personal computers. Indeed, we had to wait for a certain level of technological development to allow innovators to come up with viable PCs that people really wanted to buy. When they became available and proved to be reliable, then typewriters became immediately obsolete.

By the same token, as soon as renewable energy will become truly competitive, it will not take much for the market to abandon fossil fuels, no matter how plentiful. If state of the art solar panels can provide reliable cheaper electricity, then it is good-bye to coal, natural gas and whatever else we have been using. As history demonstrates, when technologies become obsolete, they are tossed away, without even a second thought.

Promote green tech by spending a lot more on R&D

In order to get faster to our coveted “green tech” future, Lomborg proposed to subsidize R&D, as opposed to forcing the early adoption of the still imperfect technologies we have today. Of course spending a lot more on R&D is no guarantee of success. But it will create more opportunities for innovators to come up with real qualitative changes that may indeed create a new energy technology environment.

If we can produce electricity through solar at a fraction of what it costs to do so by using natural gas, you can bet that, just as the new cost-effective solar panels are rolled out, the gas wells will be closed down in no time. But to force people to abandon gas today, and use still imperfect wind or solar is bad policy and bad economics. And it gets even worse if you need to convince reluctant taxpayers that they really have to swallow this –today–because we are cooking up the planet and soon enough there will be gigantic floods and other man-made catastrophes.

Global warming is a serious matter. But it is best addressed by producing something truly viable that will replace carbon based energy sources. Therefore let’s redouble our research efforts in “green tech”. Forcing the adoption of  half backed technologies ahead of time translates into additional costs, political resistance and negligible improvements. All in all, a bad idea.

If Carbon Energy Will Continue To Be Dominant, Why Not Mention Added Supplies That Can Come To the US From Canada?

By Paolo von Schirach

June 2. 2013

WASHINGTON – The high brow The Atlantic news magazine devoted 12 long pages to its May 2013 cover story titled We Will Never Run Out Of Oil, by Charles C. Mann. This interesting piece discusses in a sober manner the wider implications of a US-led carbon revolution. It talks intelligently about the impact of more US produced oil and natural gas (thanks to “hydraulic fracturing”, or “fracking”), on carbon emissions, climate change and on the still struggling renewable energy technologies. (Yes, despite all, wind and solar are still a bit too expensive and less reliable than conventional carbon based fuels). Furthermore, Mann goes at great length to explain that the new “dark horse” within the family of carbon energy products is methane hydrate, essentially gas blended with water that one day could be extracted profitably by drilling ocean floors. He also discusses the real long term potential of shale oil and shale gas, and a lot more.

Is there any oil in Canada?

Still, in such an erudite and comprehensive piece delineating the future prospects of carbon based energy there are only a few, and quite dismissive, words devoted to Canada, America’s key ally, neighbor and most significant oil supplier. The author does not say clearly that the US, even with the net addition of shale oil now developed in Texas and North Dakota, can reach “Hemispheric Energy Independence” –that is no more oil from OPEC– only with the help of substantial additional oil imports from Canada.

True enough, thanks to shale oil, North Dakota went from zero oil just a few years ago to almost 1 million barrel a day in 2013. This is most remarkable. But North Dakota will not go to 5 or 6 million. The simple point is that America, while its oil reserves outlook has improved quite substantially, assuming current levels of consumption simply cannot produce all the oil it needs.

Energy independence

Now, if you believe, as I do, that enhanced US energy security is an extremely valuable objective, then the opportunity to combine increased American oil and gas production with increased oil imports from Canada, this way displacing imports from Africa, Venezuela and the Persian Gulf, should be discussed and given its proper relevance in the context of a very long piece on the future of fossil fuels.

Worthless “tar sands” oil

Well, not so. Mann talks briefly and dismissively about Alberta’s “tar sands”, (choosing this deliberately pejorative term, as opposed to the more neutral “oil sands”). He says that extracting this type of oil is a mess. The process requires untold amounts of water. It is way too expensive; therefore not cost effective. (Then how come that they keep going at it?) Besides, the Canadians will not be able to export this low grade oil extracted from the “tar sands” because internal opposition will stop the construction of the necessary pipelines. Likewise, the US State Department may not grant permission to build another north to south, Canada-US, pipeline that would link producers in Alberta to the refineries located in Texas. End of story. On to the next subject.

US-Canada relations?

This is rather amazing. No discussion of Canada’s enormous oil reserves. (Yes, call them “tar sands” or “oil sands”; but all that “stuff” amounts to huge oil reserves). No discussion of the positive implications of an enhanced  strategic US-Canada energy partnership, keeping in mind that the TransCanada Keystone XL pipeline, if built, would carry daily into the US about the same amount of oil produced by North Dakota. No discussion of the geopolitical significance of displacing imports of OPEC oil, this way insulating America from the impact of  possible Middle Eastern crises. No discussion of the economic advantages of increasing our energy related commerce with Canada, our ally and major trading partner.

Canadian oil today, or methane hydrate some day?

I am not suggesting here that importing more oil from Canada all by itself would provide the final solution to all of America’s present and future energy supply problems. Far from it. But Canada’s oil is abundant, real and tangible; and we could get a lot more of it today, (if the long delayed TransCanada pipeline had been authorized and built).

I submit that humble Canadian oil is a more realistic addition to America’s (and world) energy supplies than counting on the future (and costly) development of  ocean floor based methane hydrate the author describes to us in such minute details.

US Oil Production Will Soon Exceed Imports – An Amazing Change Due To North Dakota Oil And Improved Energy Efficiency

By Paolo von Schirach

March 21, 2013

NAIROBI – Below you can read a release from the US Department of Energy Energy Information Agency. It is most extraordinary that the US, through a combination of higher domestic production and improved energy efficiency, soon enough will start producing more oil than it imports. 

This is still a far cry from “energy independence”. Still, other estimates indicate that these trends, made possible by shale oil in North Dakota, combined with increase reliance on Canadian (as opposed to OPEC) oil for imports, will soon create at the very least “Hemispheric Energy Independence”, meaning that North America will be self-sufficient when it comes to basic energy supplies. This will have substantial geopolitical consequences. “Good Bye Persian Gulf”.

Here is the release:

“Monthly crude oil production in the United States is expected to exceed the amount of U.S. crude oil imports later this year for the first time since February 1995. The gap between monthly U.S. crude oil production and imports is projected to be almost 2 million barrels per day (bbl/d) by the end of next year—according to EIA’s March 2013 Short-Term Energy Outlook.

According to EIA’s projections:
– Monthly crude oil production could surpass net crude oil imports later this year.
– Monthly crude oil production is forecast to top 8 million bbl/d in the fourth quarter of 2014, which would be the highest level since 1988.
– Net crude oil imports are expected to fall below 7 million bbl/d in the fourth quarter of 2014 for the first time since 1995.

This projected change is primarily because of rising domestic crude oil production, particularly from shale and other tight rock formations in North Dakota and Texas.

Given the uncertainties in this forecast, the timing of the crossover between U.S. crude oil production and net crude oil imports could change, based largely on supply conditions. For example, supply would decrease if a strong 2013 hurricane season disrupts U.S. offshore oil production (and thus delays or prevents a crossover), or increase if there are higher-than-expected increases in tight oil production (meaning production might exceed imports sooner than forecast).”


T. Boone Pickens Still Pushing His Plan To Adopt US Produced Natural Gas As Transportation Fuel – A Great Idea Whose Time Has Come

By Paolo von Schirach

February 22, 2013

WASHINGTON –  T. Boone Pickens keeps pushing forward his plan to convert American vehicles to US produced (inexpensive and cleaner) natural gas. His purpose is to help the US economy by promoting the use of a now abundant US resource, while lessening US dependence on oil; as oil prices, unlike domestic natural gas, are still determined by the OPEC cartel, no matter how much more oil America is getting now from North Dakota.

Use US natural gas to avoid OPEC controlled oil

In other words, we determine our own (very low) price of gas. OPEC still controls oil prices. Hence the advantage in economic, geo-political and environmental terms of choosing US produced natural gas as transportation fuel. Gas is plentiful, domestic, cheaper and cleaner than gasoline or diesel.

In Pickens’ own words: 

This morning [February 21] I also co-hosted a SquawkBox on CNBC where we talked about our nation’s dependence on foreign oil and how the U.S. can fuel domestic energy production.

Key points of the interview:  

 — Despite great strides in domestic energy production, U.S. consumers are seeing no relief in gasoline prices because oil is a global commodity and Saudi Arabia is the swing producer.  

 — OPEC is a cartel, and the best way to break the cartel and address rising fuel costs is to inject competing transportation fuels into the mix.  

 — Taking advantage of our expanding supplies of natural gas, particularly in the heavy duty truck and fleet market, is the most realistic way to solve the national security and economic threat tied to OPEC oil/diesel/gasoline.” 

There is long road ahead before we convert our vehicles, beginning with heavy trucks, to natural gas, but it well worth the effort.


Electric Cars Do Not Sell – Just Like Renewable Energy, A Good Idea Whose Time Has Yet To Come – Innovation Will Replace Carbon Based Energy, But Not Today

[the-subtitle ]

By Paolo von Schirach

February 4, 2013

WASHINGTON – The New Green Economy that would have created tens of thousands of new and highly paid jobs was one of Obama’s first term promises. It sounded good, and it seemed to be in step with the unfolding new era of expensive (and scarce) oil and global warming. Going green appeared both smart and virtuous.

Steven Chu to the rescue

America would finally shake off its dependence on oil, while creating new, sustainable and at the same time highly profitable sectors. To make all this happen, Obama called upon Steven Chu, eminent scientist and Nobel Prize recipient, to run the Department of Energy. The mandate was clear: Washington would deliberately push forward the development and the adoption of the best renewable energy solutions.

Bad timing

Great plan, at least in principle. But horrible timing. As Chu was providing credits and grants to renewables, the US shale oil and gas revolution was unfolding, with zero Washington backing and zero US Government appreciation of its enormous consequences. Shale oil and gas represent a real game changer. At least for a few decades, America will have much more carbon based energy reserves than any estimates had previously envisaged. The US has now the cheapest gas in the developed world. These reserves will last for about a century. So much for shortages and sky high prices for imported natural gas.

This shale revolution undercut at least part of the rationale for the quick adoption of renewable energy sources. Especially when it comes to power generation, hard to beat current prices for US natural gas.

Electric cars doing poorly

And what about the revamped and re-engineered electric cars, (EVs)? Well, the millions of anti-carbon US environmentalists looking for truly green alternatives apparently do not like them enough. Nobody is buying them. Worldwide sales are pitiful. In the US only 14,687 EVs sold in 2012. This is 0.1% of total US auto sales of 14.5 million, well below all auto makers projections.

At some point some kind of vehicle not relying on internal combustion will be developed. But we are not there yet. The unresolved issues plaguing EVs are the cost of batteries, the still limited distance you can travel with one charge, the long time required to recharge, and the lack of a national infrastructure of recharging stations.

There will be new technologies

All these problems may be resolved at some point. Or we may be surprised by some totally unexpected and different breakthrough that will transform the auto industry. Still, for the moment, auto companies do well with more fuel efficient gasoline engines, while hybrids also do well.

Lesson: Government should not try to time innovation

The lesson of all this is that it is unwise for public policy to try and time the level and pace of innovation deployments. Common sense tells us that “at some point” we shall have to move away from limited and environmentally unfriendly carbon energy sources. (In this respect please note that abundant US natural gas is also the cleanest hydrocarbon). But only when we have something better that really works.

Departing Secretary Chu should reflect on this

Forced adoption of renewables via subsidies and mandates to utilities often resulted in sub optimal choices and waste of money. As Secretary Chu is getting ready to leave office, he may want to reflect on this. Broadly speaking, the Green Tech plan was good; its timing unfortunately was not.